The UK is seeking, in parallel to the Brexit talks, a trade agreement with the EU which is of “greater scope and ambition than any such agreement before it so that it covers sectors crucial to our linked economies such as financial services and network industries.” This is an ambitious agenda on the UK’s part, especially the inclusion of financial services, an industry that is rarely featured in other trade deals. The other focus seems to be on the ‘security’. The letter refers to the ‘security’ on 9 different occasions, possibly as a subtle reminder that the UK is one of only two European nuclear powers, has the largest military and has fought two world wars on European soil in the last one hundred years.

The response from the European Council on 31 March makes it clear that Europeans’ priorities for future negotiations are different to the UK’s. Their draft guidelines reiterate that the European Council wants the talks to be orderly and more sequential/ phased than parallel. The EU negotiators also emphasized that their approach to the negotiations will not be punitive, e.g. although EU Council President Donald Tusk said that “the talks will be difficult, complex and sometimes confrontational”, he later added “the EU will not pursue a punitive approach, Brexit itself is already punitive enough.” Nevertheless, the talks on the trade deal will only begin after ‘sufficient progress’ has been made on a number of key ‘exit’ issues, including:

From the UK’s standpoint, the most contentious issue so far is the value of divorce settlement, which includes; unpaid budget commitments, pension liabilities, loan guarantees and spending on UK-based projects. There is also a possibility that the UK will remain on the hook for some of the EU’s longer term budget commitments beyond 2019 i.e. planned spending that was promised to member states but not yet marked as a ‘commitment’ in a budget year.

Michel Barnier, the Commission’s Chief Brexit negotiator has also confirmed that he will pursue Westminster for an exit bill/ divorce settlement. To-date the Europeans have demonstrated that they are united in their resolve to achieve a deal that would foremost benefit the EU citizens, albeit without punishing the UK too much. It is worth remembering that from the EU’s point of view, they need to use Brexit to prove that the costs of leaving the EU ‘club’ are high and that post-exit trading terms cannot be as good as membership terms. Time will tell if there is a chink in their armor and whether the UK’s ‘not so secret’ plan to play one member state off against another will ultimately work to the UK’s advantage. Additionally, the up-coming elections in France and Germany could alter the political landscape within Europe to such extent that the survival of the EU itself would become the number one priority, and then everything would change.